Private markets in the Middle East are poised for significant growth while the industry—alongside the entire world—explores AI’s transformative potential. The Middle East market is making great strides to diversify beyond oil and gas resources, embracing the opportunity to emerge as a hub for technology and innovation.
Yet, as Middle Eastern investors evaluate the proliferating new landscape of AI ventures, they are grappling internally with where AI fits into their own business operations. The results from a recent survey of private investors highlight this conflict, with investors puzzlingly reporting that efficiency and optimisation are top tech priorities, yet integrating AI and machine learning are not.
There are many good reasons for balancing AI enthusiasm with caution. Among them is a long-held belief that investment alpha is ultimately driven by human talent that can’t be replaced by even the most sophisticated technology. Yet, investors recognise that there are competitive implications for too much caution, which may leave them behind, unable to fully realise the great promise for humans and AI to work together.
As Middle Eastern private investors seek growth opportunities, several use cases for the confluence of people and machines are emerging. Amidst a fundraising landscape that is growing more diverse and competitive, Middle East alternative investment firms can harness the power of AI to augment, not replace, human intelligence for better performance and strategic advantage.
AI’s biggest promise for the growth of private investments
In a region where the financial landscape is rapidly evolving, AI’s ability to process vast amounts of data with speed and accuracy, predict market trends, and enhance decision-making processes offers incredible advantages. The strategic integration of AI positions private investors to gain deeper insights, streamline operations, and ultimately drive more informed and strategic investment decisions.
Here are key areas where the possibilities for AI to transform the private investor experience are clearest:
Deal sourcing
AI presents significant potential when it comes to helping investors evaluate opportunities—and even more exciting, predict the next ones. AI algorithms can analyse pools of promising deals and identify the most strategically aligned opportunities based on an investor’s specific and personalised criteria. The industry is watching closely to better understand AI’s ability to synthesise market and behavioural data. The ultimate idea is to help investors bypass saturated markets and easily identify otherwise hidden opportunities.
Enhanced due diligence
The private dealmaking process involves a vast exchange of information. AI’s ability to gather, process, and analyse large amounts of information from various sources can make due diligence exponentially more efficient and comprehensive. Hidden gem opportunities can also come with hidden problems. AI can ingest and parse complex documents and sentiment-driven data to unearth red flags that could be missed when buried in reams of paper. Moreover, AI can assist with regulatory benchmarking and monitoring regional compliance nuances, supporting ongoing adherence in a dynamic regulatory environment.
Intelligent data gathering
Unlike public markets, the documents and reports in private markets are largely unstandardised. The complexity becomes even greater as investments grow more layered, as in a fund of funds, where everyone’s reporting is different. This is where AI’s ability to handle large quantities of unstructured data is particularly transformative. The reality is that no one wants to key in data anymore. Scraping data from disparate data sets and creating a unified view with a click offers nearly incalculable value. It’s a tremendous time-saving method, and with proper human oversight, it can be more accurate than manual data entry.
Data-backed insights and analytics
The instant processing of massive amounts of data provides an obvious strategic advantage to investors who are always seeking an edge. AI’s deep learning power to detect complex or subtle patterns can move investors beyond traditional metrics for making investment decisions that beat competitors to an opportunity.
It’s possible that soon—provided they have good data—investors will simply talk to AI like a trusted advisor:
- “How does my exposure to X affect the picture of risk?”
- “Where are there early warning signs of distress?”
- “What is the optimal timing and strategy for exiting each investment in our portfolio?”
To be clear, the industry—like most—is still exploring the possibilities and risks of AI. However, the promise of highly accurate, predictive and near-immediate answers in granular detail presents an exciting picture of the future.
The private investor’s balancing act
AI’s potential to advance Middle East private markets is clear, but as we work to pinpoint its sweet spot, it is essential to recognise what cannot be delegated.
Relationships are the cornerstone of successful Middle East dealmaking. Building and nurturing these relationships happens over the years, often through personal interactions that build trust and human connection. Most things today can be done online in the cloud, but successful private investments are ultimately made when there is trust and confidence in the people involved.
Strategic decision-making in private investing is a science and an art. It involves more than data analysis. Wisdom, gut feeling, and the ability to evaluate people, talent, and management teams are integral to the process. Committing capital is not merely about investing money and waiting; it often involves a buy-and-build approach, where investors actively work alongside management to help companies grow. Few things are as energising as people collaborating to realise a shared vision; AI will have a difficult, if not impossible, time replicating those experiences.
AI can enhance efficiency, provide valuable insights, and assist in data-driven decision-making. However, the essence of private equity investing—fostering relationships, making strategic choices, and navigating local complexities—requires the irreplaceable touch of human expertise. By leveraging AI’s capabilities while preserving the core human aspects of fruitful private investments, investors can achieve a balanced and effective approach that maximises technology and the personal touch.